Google Finds a Way to Beat

[1]Google‘s (NASDAQ:GOOG[2]) latest earnings report is a bit of a mixed bag. But investors seem to be fine with the results. In after-hours trading Thursday, the stock is up about 3%.

In the second-quarter, Google posted an 11% increase in earnings to $10.12 a share, which was above the consensus of $10.04. Revenues were up by 35% to $12.21 billion. But a big part of the jump came from the integration of the $12.5 billion acquisition of Motorola Mobility. When factoring this out, Google’s revenues were up 21%.

No doubt, Google continues to innovate. Just look at its recent I/O developer’s conference[3]. At the event, Google launched its Nexus 7 table, which has a seven-inch, HD screen and a front-facing camera. The price tag is a competitive $199. As a result, it should put some pressure on Amazon‘s(NASDAQ:AMZN[4]) Kindle Fire. It may even be a rival to Apple’s (NASDAQ:AAPL[5]) iPad.

The Chrome browser is also getting upgrades. In fact, it’s now the No.1 in market share, beating out Microsoft’s (NASDAQ:MSFT[6]) Internet Explorer.

Google even has plans to move into the fast-growing cloud business, which has benefited companies like Amazon and Rackspace (NYSE:RAX[7]). Google certainly has some huge advantages, such as global infrastructure and technical expertise.

Yet despite all this, it’s still been a tough year for Google. Consider that the shares are off about 8%.

One big concern is the shift to mobile. While Google has been benefiting from its Android mobile operating system, it could be tough to monetize the growing traffic. Mobile advertising is still in the early stages, and mobile ad budgets are light. This is probably a key reason for the deceleration in the cost per click for Google’s ads, which is down 16% over the past year.

Google must also contend with the growing competition from rivals like Facebook (NASDAQ:FB[8]), Twitter and LinkedIn (NYSE:LNKD[9]). Even with Google+, the company’s social efforts have been lackluster.

But perhaps the biggest wild card is the Motorola acquisition. While it was helpful in getting valuable patents, the hardware business could be an albatross. After all, Motorola is far from healthy. In the quarter, it had an operating loss of $233 million.

As seen with other companies — like Research In Motion (NASDAQ:RIM[10]M) and Nokia (NYSE:NOK[11]) — it’s no easy feat to turnaround an ailing mobile operator. That history certainly doesn’t bode well for Google.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book How to Create the Next Facebook: Seeing Your Startup Through, from Idea to [12]IPO[13]. Follow him on Twitter at@ttaulli[14] or reach him via email[15]. As of this writing, he did not own a position in any of the aforementioned securities.